How to Claim a Charitable Donation of Stock

The method of reporting charitable donations varies by the amount and item being claimed. A person who chooses to claim a charitable donation of stock will find himself in a position to claim the full, fair market value of the stock while avoiding taxes on capital gains.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• IRS Form 1040
• Schedule A
• Form 8283

Make Certain That You Are Donating to a Recognized Charitable Organization

1. Request a copy of the organization's letter from the IRS, stating its tax-exempt status as well as its status for receiving charitable contributions. This is necessary if you intend to claim a deduction based on your donation of stock or other securities to that organization.

2. Call the IRS toll-free at [phone] to verify whether the organization is a charitable entity that can receive your donation of stock or other securities that you intend to claim.

3. Obtain and examine IRS Publication 78, available at IRS.gov (see Resources below). It lists eligible organizations that are qualified to receive any donations you intend to claim.

Gather the Proper Proof Needed to Claim a Charitable Donation of Stock

4. Give the IRS the proper name of the issuer for the stock that you are donating.

5. Indicate whether the stock you are donating represents securities that are commonly traded on the stock exchange or by other over-the-counter means.

6. Offer specific information on the type of securities you are donating.

7. Provide the date of your donation. This will vary and is dependent on whether you are signing the donated securities over or making an electronic transfer through your broker.

Procure the Forms Necessary to Claim Your Charitable Deduction of Stock

8. Indicate your intention to itemize your deductions on IRS Form 1040, under the section "Tax and Credits."

9. Use Schedule A to itemize your claim of a charitable donation of stock in the Gifts to Charity section.

10. Select Form 8283 to claim your deduction for a non-cash charitable contribution, as indicated on Schedule A.

Tips & Warnings

• If you hold stock that you wish to donate, but it has lost value, you should cash out your stock instead of donating it directly. This will allow you to take a deduction for the loss and then make and claim a cash donation.
• If you are using IRS Publication 78, it is a good idea to check for any changes. You can do this electronically, starting with the IRS website.
• Avoid donating any stock that shows a loss. It will nullify your ability to take a deduction on that loss.

Resources

• Electronic version of Publication 78 at IRS.gov.